BEIJING: The heat came out of China’s iron ore imports in April, with vessel-tracking and port data suggesting a decline of several million tonnes from the near-record levels recorded in March. A total of 83.27 million tonnes of the steel-making ingredient was discharged at Chinese ports in April, down 3.7 percent from March’s 86.46 million, according to data compiled by Thomson Reuters Supply Chain and Commodity Forecasts. It’s worth noting that the vessel-tracking and port data typically comes in below the official Chinese customs data, which reported 95.56 million tonnes of iron ore imports in March, the second-highest on record. Nonetheless, the ship data does point to lower imports in April, most likely in the order of 3 million tonnes. Apart from a weak month in February, most likely related to the Lunar New Year holidays, the vessel-tracking figures show April to be the weakest month for iron ore imports since September last year.
It also appears that much of the decline in iron ore imports was borne by Australia, China’s largest supplier, with the data showing imports of 53.9 million tonnes in April, down from 58.9 million in March. In contrast, number two supplier Brazil saw Chinese imports of 18.48 million tonnes in April, up from March’s 16.54 million. The lower imports from Australia in April are most likely the result of earlier weather-related disruptions in the main producing area of Western Australia state that affected both mines and rail networks. This means imports from Australia are likely to recover again in May, which may be a bearish signal for prices if miners such as Rio Tinto, BHP Billiton and Fortescue Metals Group decide to chase volumes over prices.
This can already partly be seen by the 11 percent jump in iron ore shipments from Port Hedland, the terminal used by BHP and Fortescue, to 34.86 million tonnes in April from 31.5 million in March. This tallies with the Chinese import numbers from Thomson Reuters, given the sailing time of around two weeks between northwest Australia and China. Ultimately iron ore prices are driven by steel prices and margins, and here the outlook is less certain, with the main Shanghai rebar contract trending lower in recent weeks. It hit a peak of 3,440 yuan ($499) a tonne on March 15, but slipped 9.2 percent since then to Wednesday’s close of 3,123 yuan, as doubts emerged among market participants over the resilience of China’s infrastructure and construction spending. While Chinese steel output has remained robust so far this year, the market seems to be swinging toward the view that margins will be under pressure in the second half of the year as domestic demand growth slows and exports struggle. Already Chinese steel mills are seeing lower exports, with shipments of products sent overseas slumping 25 percent to 20.72 million tonnes in the first quarter of this year compared to the same period last year. While exports are by no means the key factor for the 800 million tonnes-a-year Chinese steel sector, a significant downturn is another bearish factor for the industry.
